White House Proposals for Civil Service Reform: What They Missed

The White House proposed a number of changes that would dramatically reshape the federal workforce and how federal workers are compensated. My first post in this series provided the list of proposed changes. The second addressed what they got right. This post will look at what they got wrong and what is missing from the proposed reforms.

Few people will argue that the civil service needs no reform. The job classification and pay systems are outdated, employee accountability is an issue that troubles both outsiders and government workers, and the hiring process is terrible. Performance appraisal processes do little to identify truly outstanding or truly bad employees.

The White House proposals were spot on in several respects (see my last post), but they missed the mark on a few. Following are my views on the misses:

“Since Federal workers perform many essential functions, failures can chip away at the citizenry’s collective trust in Government.”

Recent surveys show that the American people have a generally positive view of most government agencies. and very positive reviews of quite a few. More often than not, failures in agencies are attributed to lack of political leadership, rather than the work of civil service employees. Congress and politicians in general do not enjoy high or even middling approval ratings.

“To better align with the private sector, the Budget reduces Federal personnel compensation costs, primarily the annuity portion.”

The White House proposal increases the employee contribution to the annuity portion of the retirement plan, shifts from a “High 3” to a “High 5” annuity calculation, and eliminates the FERS Special Retirement Supplement for employees who retire before becoming eligible for Social Security. Retaining any kind of defined benefit option is still a better deal than most private sector employees get. Those of us who are older remember a time when large employers offered pension plans. Employees would typically go would go to work somewhere with the idea of staying for the rest of their working lives. I wish that model still existed, but the economics of defined benefit plans, combined with a far more mobile workforce, make that unlikely to ever happen again.

The proposals to increase employee contributions and reduce benefits may be economically realistic, but they miss the opportunity to take a hard look at retirement security for federal workers and for American workers everywhere. If we are going to permanently shift the burden for retirement to defined contribution plans such as the Thrift Savings Plan, Individual Retirement Accounts, 401(k) and similar plans, it is time to rethink retirement options for everyone. Many retirement experts say most Americans have inadequate retirement savings. That is particularly true of lower income workers. Reviewing federal employee retirement benefits in that context might open the door for a broader look at options that could make a secure retirement available to everyone. That might mean higher tax-deferred contribution limits, a larger employer contribution, incentives for employers to fund retirement plans for their workers, or something else entirely. Simply cutting what is there does not start the debate that probably should happen. The White House proposal includes a recommendation to study creation of a defined-contribution only annuity benefit for federal workers. That should be expanded to address the larger issue.

“The Budget proposes to slow the frequency of these step increases, while increasing performance-based pay for workers in mission-critical areas.” Most folks agree that the general schedule is an outdated pay system. Rather than scaling back on step increases, a better solution would be to rethink the entire job classification and pay system. Piecemeal fixes will do little to correct the underlying problem – that the general schedule is based on a late 1940s mostly clerical workforce that no longer exists. The interest in performance-based pay is also something many folks agree with. The problem is that today’s performance appraisal processes are typically not very credible. From overly generous ratings to infrequent manager feedback and performance goals that base everything on individual performance when we know that most work is accomplished in teams, the current appraisal process may not be adequate to serve as the basis for pay decisions. Any move to performance-based pay should be part of a comprehensive set of civil service reforms that are derived from a well thought out process.

“Federal jobs can take more than a year to fill. The job announcements remain a confusing cipher to applicants. The hiring process – which includes at least 14 steps – is cumbersome and frustrating for Federal hiring managers. As the nature of work changes, the Federal Government requires more term employees. Many individuals are interested in public service but not seeking a career in the civil service. Existing Federal hiring rules make term hiring as difficult as hiring a permanent employee. Another major hindrance to timely hiring is a massive security investigation inventory.” This correctly identifies the problem, but what is missing is the solution. The federal hiring process is a mess and it needs to be fixed. Last year I outlined the problems with the hiring process, along with a two-part set of solutions (click for Part 1 and Part 2) that could bring federal hiring into the 21st century.

The solutions suggested in the White House proposals are a mixed bag – some good, some incomplete, some missing the mark. I am concerned that implementing them without a comprehensive civil service reform strategy may aggravate some existing problems. For example, the Congressional Budget Office report cited by the White House says some higher graded and professional jobs are underpaid. Removing retirement benefits that make up a large part of the total compensation package, without addressing total compensation for those jobs, may actually make the pay disparity and the difficulty in filling them even worse. The civil service is a complex system that affects more than the 2 million federal workers and their families. It also affects local economies in towns across the country where the government is a large employer. It also affects the ability of the government to carry out its many and varied missions. Comprehensive civil service reform is something that was recommended by virtually every group that was involved in writing pre-election proposals for the incoming administration.  It was a good idea before we knew who would win the election and it is still a good idea. To be credible, it must be formulated through an inclusive process that hears from all parties and is based on data. Both parties will put forth proposals based on ideology and political interests. Rather than a political process, I suggest the equivalent of the Hoover Commission – one of the most consequential reform commissions the government has ever seen – as a fully inclusive model for developing a new civil service framework. The Hoover Commission, officially known as the Commission on Organization of the Executive Branch of the Government, was appointed by President Truman and chaired by former president Herbert Hoover. Presidents Truman and Hoover were not known to be friends. In fact, Mr. Truman had made a number of disparaging remarks about Mr. Hoover. They overcame their partisan differences to work together, and in the process generated many recommendations that transformed government for the better. In the process they also became friends. A bipartisan, or even better – a nonpartisan – approach to civil service reform would ensure that federal workers are treated fairly, based on objective data, and that the American people get the civil service they need to carry out the people’s work.

 

White House Proposals for Civil Service Reform: What They Got Right

The White House proposed a number of changes that would dramatically reshape the federal workforce and how federal workers are compensated. My last post provided the list of proposed changes. This post will address what they got right, while the next one will cover what they got wrong and what is missing from the proposed reforms.

“While pursuing a series of proposals to overhaul Federal compensation and benefits, the Administration also intends to partner with Congress to cull statutory and regulatory rules that have over time created an increasingly incomprehensible and unmanageable civil service system.”

It is hard to argue with this one. Rather than a comprehensive set of reforms, the civil service has been subject to piecemeal changes since the passage of the last big reform package – the Civil Service Reform Act of 1978. Even good ideas can result in a mess if they are implemented as one-offs in a single agency or type of job.

“No Time to Wait,” a clarion call to civil service reform, was issued last year by the National Academy of Public Administration. That report questioned whether a “one- size fits all” Federal personnel system is necessary or even effective. 

The NAPA report is well worth reading (full disclosure: I serve as Vice Chair of NAPA’s Board). The part about one-size-fits-all not being the way to proceed makes more sense when it is read in context. Here is what NAPA said: “Moreover, we believe that public servants should not be viewed as symbols of big government or as problems that need to be eliminated whenever possible. The nation needs to follow the central lesson taught by its leading private corporations: the best-managed companies see their employees as their biggest assets, and government should too. Government employees are fundamentally important assets in pursuing government’s goals. Although we certainly need greater accountability in public service, what we most need is a system that holds administrators accountable for results. How well government employees accomplish government’s mission and what principles are pursued in doing so are the key issues. Viewing “accountability” through the narrow lens of “firing employees” does the debate and the country no good service.

Instead, the focus should be on the creation of a federal human capital system that (1) focuses on how best to achieve the government’s mission, (2) fits the core principles of merit to meet the government’s new challenges, and (3) redefines accountability through strategies and tactics that meet citizens’ needs. What the country does not need is a system preoccupied by—and mired in—process.

Nor does it need a “one-size-fits-all” strategy that jams all federal agencies into uniform boxes. The federal government’s work and missions are just too varied for this to succeed. Efforts to force one-size solutions only undermine the ability of government’s many departments and agencies—each created for a different reason—to serve their diverse constituents in ways that meet their individual (and individualized) needs.”

“A Congressional Budget Office (CBO) report issued in April 2017 found that, based on observable characteristics, Federal employees on average received a combined 17 percent higher wage and benefits package than the private sector average over the 2011-2015 period. The disparity is overwhelmingly on the benefits side: CBO found that Federal employees receive on average 47 percent higher benefits and 3 percent higher wages than counterparts in the private sector. These gaps result from disproportionately high Federal compensation paid to individuals with a bachelor’s degree or less; Federal employees with professional degrees are actually undercompensated relative to private sector peers, in CBO’s analysis. The generous benefits package offered by the Federal Government includes a defined benefit annuity plan and retiree health care benefits – both are increasingly rare in the private sector. The Federal defined benefit plan, according to CBO, is the single greatest factor contributing to the disparity in total compensation between the and private sector workforce. To better align with the private sector, the budget reduces Federal personnel compensation costs, primarily the annuity portion.”

The White House proposals focus on areas where federal and private sector compensation differ, without restating the flawed arguments that federal workers are overpaid by 50% or underpaid by 30%. Virtually no one agrees with those extremes. After working in federal HR for 33 years, I have to agree with the general idea that federal benefits are generous and that pay is out of balance with the private sector at lower grades (where it is high) and at high grades and in shortage category jobs (where it is often too low). It is obvious that federal benefits, particularly for retirement, are more generous than in the private sector. The real question is whether the government should simply follow the lead of businesses, or if they should set an example of what we would hope to see every employer offer. For the private sector, the idea of a defined benefit pension plan is dying and it is unlikely to ever return. That does not mean it is the best approach.

“Federal employee sick and annual leave benefits are also disproportionate to the private sector. All Federal employees receive 10 paid holidays and up to 13 sick days annually, as well as 13 to 26 vacation days, depending on tenure. This Budget proposes to transition the existing civilian leave system to a model that has worked well in the private sector, which is to grant employees maximum flexibility by combining all leave into one paid time off category. This would reduce total leave days, while adding a short term disability insurance policy to protect employees who experience a serious medical situation.”
This one is another area where we should decide whether the government should lead or follow. Leave benefits in the private sector are often less generous than in government, but not always. Many private employers offer paid parental leave, something that the government does not. Many offer disability policies to cover both long and short term illnesses. The White House proposal includes short term disability and maternity coverage. The real question on this one may be how it is implemented. The proposal is short on details. Would it cover existing employees? Only new hires? How many days would be appropriate?

“Across the board pay increases have long-term fixed costs, yet fail to address existing pay disparities, or target mission critical recruitment and retention goals.”

That idea that the current pay system is inflexible is true. Yes, agencies can offer quality step increases for outstanding performance or deny step increases for poor performance, but the system is designed to move employees from the bottom step to top step over time. In general schedule jobs the range is about 30%. One approach to performance based pay would be to reduce the number of step increases that can be given based on longevity. The devil is in the details, and we do not have the details on how it might work.

“Federal jobs can take more than a year to fill. The job announcements remain a confusing cipher to applicants. The hiring process – which includes at least 14 steps – is cumbersome and frustrating for Federal hiring managers. As the nature of work changes, the Federal Government requires more term employees. Many individuals are interested in public service but not seeking a career in the civil service. Existing Federal hiring rules make term hiring as difficult as hiring a permanent employee.”

Amen. Federal hiring processes are too cumbersome, lack flexibility, and scare off potential applicants.

“Another major hindrance to timely hiring is a massive security investigation inventory. Beyond the immediate problem, fundamental reform of the background investigation process is necessary, to both increase efficiency and reduce costs.” 

The security clearance process is a bit of a mess. The problem is more than just a backlog. We could use a fundamental rethinking of background investigations, including how, when and why they are done. Throwing more resources at the backlog is not going to fix the underlying problems.

“Agencies will continue to examine their workforces to determine what jobs they need to accomplish their mission, taking into account the impact of technological investments that automate transactional processes, artificial intelligence that can streamline the byzantine compliance and regulatory processes, online and telephone chat-bots to improve customer service, and other such tools that may reduce agency personnel needs. Currently, many professionals are performing tasks that the private sector dispatches via technology tools such as “bots” and artificial intelligence.”

This should be a basic component of management in any organization. Government is making some progress, but the overall customer experience in many agencies leaves a lot to be desired. It really is time for government to step into the 21st century. That means fully embracing digital solutions, treating the public as consumers and delivering the kind of customer experience consumers have come to expect from their service providers.

“The Administration recognizes that the vast majority of employees uphold their Oath of Office and work diligently. A percentage, however, are simply unable or unwilling to perform at acceptable levels. Their peers in the Federal workforce recognize this issue. Every year, the vast majority of Federal workers surveyed disagree with the statement that, “in my work, steps are taken to deal with a poor performer who cannot or will not improve.” The requirements to successfully remove an employee for misconduct or poor performance are onerous (see Chart 7-6). Employees have a variety of avenues to appeal and challenge actions. Agencies may settle cases to avoid the expense of litigation, regardless of the strength and documentation of a manager’s case. Settling can avoid the prospect of an even more costly decision by an arbitrator unaccountable to taxpayers. Federal managers are reluctant to expend the energy necessary to go through the process of dismissing the worst performers and conduct violators.”

I have been writing about this problem for years. It is a legitimate concern. Accountability is about far more than firing people. I will address that issue more in my next post.

“The Federal workforce also contains untold numbers of selfless civil servants who perform their jobs in a manner that honors and uplifts their fellow citizens. They are part of the fabric that makes this Nation great. We need reforms that recognize and reward such individuals, and free them from unnecessary red tape so that they can more efficiently and effectively support the mission of Government.”

I have worked in and with government for almost 40 years. In my experience, most federal workers do a great job. I would have preferred to see this statement at the beginning, rather the end, of the reform proposals.